The raging fires in Los Angeles, consuming over 160 square km – an area comparable to the stretch from Bondi to Burwood, the Harbour Bridge to Kogarah – have captured global attention.  

While much focus rightly rests on the devastating impact on lives lost and homes destroyed, it is vital to acknowledge the profound toll on thousands of businesses – and the people who rely on them for a livelihood.  

The fires have left many enterprises grappling with uninsurable losses, exposing an issue that has troubling parallels here in NSW.  

Indeed, we are fast approaching the three year anniversary (February 28) of the devastating Lismore floods.  

The biggest flood in modern Australian history inundated the Northern Rivers town, killing five people, displacing 31,000 people, and damaging thousands of homes and businesses.    

Thirty-six months later, the soaring cost and diminishing availability of business insurance threaten the viability of countless enterprises in our state. 

This issue is not new. Since 2019, Business NSW’s Business Conditions Survey has consistently identified insurance as the number one cost concern for businesses. Over the last six quarters, it has remained the top issue, surpassing energy costs, tax, rent, and wages.  

Alarmingly, many businesses report that insurance premiums are escalating by approximately 30% per year.  

For some, insurance has become so prohibitively expensive that they are effectively uninsurable. This untenable situation jeopardises not only individual businesses but also the broader economic stability of NSW. 

There is no doubt that there is a direct link between natural disasters and spiralling insurance premiums. But many businesses are seeing skyrocketing premiums for essential but unrelated covers, like public liability and professional indemnity insurance.

These are non-negotiables for businesses to operate, maintain staff, and secure leases. The ripple effects extend to workers’ compensation, further inflating costs. This scenario is a stark reminder of the precarious position many NSW businesses find themselves in. 

Alarmingly, a December survey of Business NSW members found that 64% of respondents were not fully insured against catastrophic events. This leaves businesses exposed and underscores the urgent need for systemic reform. 

The current insurance market fails to meet the needs of modern businesses. Standard insurance products, with slow decision-making processes and inflexible payout structures, are ill-suited to the dynamic challenges businesses face today.  

Those who manage to secure payouts are often required to rebuild exactly as before, perpetuating vulnerabilities to future disasters. 

Moreover, competition in the insurance sector is deteriorating. Businesses are left with fewer options, higher premiums, and diminishing coverage. The government increasingly bears the financial burden as the insurer of last resort, a trend exacerbated by the growing frequency and intensity of natural disasters. When insurance fails we all pay – as taxpayers. 

For years, Business NSW has called for the removal of the Emergency Services Levy (ESL) and stamp duty on insurance premiums. These taxes disproportionately inflate the cost of insurance, compelling many businesses to forgo coverage entirely.  

As one of our members said recently “it also unspeakably unfair that those of us who buy insurance to protect ourselves and our businesses are paying the way for those who eschew insurance”. 

We commend the NSW Government’s commitment to reforming the ESL system to align with other mainland states. However, these reforms must be accelerated to provide immediate relief to struggling businesses. 

To ensure a resilient and competitive business environment in NSW, we urge the government to adopt the following recommendations: 

• Accelerate the Removal of the ESL and Stamp Duty on Insurance Premiums: Eliminating these costs will make insurance more affordable, reducing the risk of businesses operating without coverage.
• Right-Size Insurance Requirements Across Government Contracts: An audit of procurement policies is essential to ensure insurance requirements are fit for purpose. For instance, the $20 million public liability and professional indemnity coverage currently required by NSW vendors may be excessive for certain contracts.
• Develop Market-Specific Insurance Solutions: Facilitate workshops to explore alternative products tailored to specific industries, such as professional indemnity for specialised construction services, public liability for tourism and activity-based businesses and geographic solutions for flood- and bushfire-prone locations.
• Incentivise Insurance Innovation: Launch a competition to fund innovative insurance solutions that reduce government liability, lower premiums, and expand coverage options for businesses. 
• Study Coverage Gaps in the NSW Insurance Market: Conduct a comprehensive review to identify and address insurance gaps, ensuring NSW remains competitive with other markets. This should include a comparative analysis of products such as public liability, transport insurance, and business continuity coverage.
• Proactive government leadership in supporting the generation of additional “insurance-like” products that can step in and provide some degrees of cover under increased risk conditions (e.g. mutual products for regional primary industries might well need some early intervention, sponsorship and leadership from government to provide a longer-term benefit for all).

The insurance crisis is not a problem that can wait for long-term solutions. While reforms to improve affordability and accessibility are underway, businesses need immediate support. Delays in addressing these issues will only deepen the economic risks to our state. 

As NSW faces increasing climate-related challenges, we must learn from international examples like LA. The impact of inaction is clear: uninsurable businesses lead to closures, job losses, and a weakened economy. The NSW and Australian Governments have the opportunity to act decisively and ensure a sustainable future for our business community. 

Business NSW stands ready to work with government and industry stakeholders to drive these reforms. By implementing these measures, we can safeguard the competitiveness of NSW businesses and build a more resilient economy for all. 

The time for action is now.